Statement by IMF Managing Director Dominique Strauss-Kahn at the Conclusion of his Visit to Hungary

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), visited Hungary on January 13. He issued the following statement in Budapest at the conclusion of the visit:

"Today I was privileged to meet with the Hungarian authorities, including Prime Minister Ferenc Gyurcsány, Finance Minister János Veres, and central bank Governor András Simor. I also met with the leader of Fidesz, Viktor Orbán, a group of legislators, and other prominent representatives of Hungarian society. Our discussions focused on recent global economic developments and the progress of Hungary's economic program supported by the IMF. I welcomed the authorities' efforts to advance policies that are bringing about a rapid reduction of financial market stress in Hungary and will contribute to create the conditions necessary to facilitate appropriate reforms in government finances and in the banking sector.

"There was agreement on the need to strengthen government finances. The 2009 budget is consistent with the size of the fiscal adjustment envisaged under the program. It will be important that budget execution delivers the programmed expenditure restraint.

"On the banking sector, I welcomed the recently enacted bank support law, which provides Hungarian banks with access to capital enhancement and borrowing guarantee facilities that are similar to those available to banks in other European Union countries. Banks currently have strong solvency positions and stable funding. Going forward, external funding is likely to be tight, given the ongoing global deleveraging, and the asset quality of banks will deteriorate in the economic downturn.

"The Fund supports recent monetary policy decisions. Reductions in the policy interest rate have been appropriate, in light of the fall in projected inflation and the moderation of financial market stress. We agreed that as inflation is likely to continue falling, a prudent easing bias appears appropriate, as long as financial markets remain supportive. Any further rate cuts should be gradual and cautious, and commensurate with improvements in investor confidence."